Estate planning goals for high-net-worth individuals (HNWI) should include protecting inheritances for their heirs, minimizing estate tax liability, and avoiding the probate process. Living trusts are commonly used by both attorneys and financial advisors as part of the estate planning process because they ensure that assets are distributed to the correct individuals and/or entities. Trusts also help minimize estate taxes by allowing you to remove assets from your estate so more of your wealth can be passed on to your beneficiaries.
Selecting a trustee is an important decision, especially for the HNWI because depending on the type of trust you decide to establish, that person will be in charge of overseeing your assets and those of your beneficiaries. Trustees are fiduciaries of the trust and its beneficiaries and are required to comply with the standards defined by the trust agreements.
The trustee must be faithful to the beneficiaries and should not usurp the trust’s opportunities for his or her own benefit or steal assets from the trust. Unfortunately, a trustee isn’t always honest when it comes to doing his or her job. If the actions of the trustee benefit the trustee, their family or friends, or they act in such a way that violates the trust agreement, they’ve breached their duties.
This can happen in a number of ways. A person might steal directly from the trust. He or she may pay themselves thousands of dollars to administer the trust, waste money or attempt to change the terms of the trust to benefit others instead of the beneficiaries. Any of these scenarios can open the trustees up to a civil action for breach of fiduciary duties.
How to Know if You’re Being Robbed?
The best way to determine if a trustee has been stealing from a living trust is to get an accounting of the financial documents of the trust. First, read through the trust agreement which defines the responsibilities of the trustee. In the agreement, the following should clearly be stated:
- When the trustee can spend funds
- How the trustee is to maintain assets
- When the trustee is to make disbursements
- What documents the trustee should maintain
- What information you have a right to review
You’ll need to request all relevant financial documents pertaining to the operation of the trust, including bank records and asset valuations, providing you haven’t waived your rights to do so. The trustee has 60 days in which to provide you with this information before you can petition the court to compel him or her to provide you with the documents.
If there is sufficient evidence to prove that your trustee is mismanaging or stealing from the trust, he or she can be sued for breach of fiduciary duty to recover any damages sustained by the trust.
Legal Guidance
You’ve worked hard to provide for the financial security of your family. When a trustee is stealing from a trust, that can do serious damage to the inheritance of your heirs.
Jeffrey M. Verdon is a preeminent estate planning and asset protection lawyer in California whose goal is to provide intelligent solutions for high net worth individuals’ estate planning needs. Contact Jeffrey M. Verdon Law Group for information on how you can protect your assets and legacy with a HYCET Trust.